The Government department is proposing to remove the protection for the co-operative name, which currently ensures new business registrations adhere to co-operative principles.

In the consultation, BIS said all words specified on the sensitive list — which also includes commission, council and licensing — were to protect the public from being misled by a business name. But it said as “language evolves” this may no longer be considered a risk.

The list does not prohibit the use of those words, but it allows specified bodies to submit an objection on the usage, such as the Charities Commission or the Department of Health.

The BiS ‘red tape challenge’ is proposing to either repeal the sensitive list or to retain, but reduce it. In removing the statutory instrument behind the list, BiS said this will allow companies to choose any name, which would “significantly speed up registration” and ensure new registrations do not go through a “costly and time consuming process”.

But BIS said a reduced list would need to show a clear criteria for approval for those who want to use protected words such as ‘co-operative’.

Co-operatives UK's Secretary General Ed Mayo said the public associate co-operatives with being "trustworthy, business-like and fair" and that he is concerned this will diminish. He commented: "We are extremely concerned that without this protection, rogue businesses may trade off, and potentially ultimately, tarnish, this reputation. We are urging people to help protect the good name of co-operatives.”

In its draft response to the consultation, Co-operatives UK said that between 2008-2011 the number of co-operatives grew by 23 per cent and that it is concerned “failure to protect these terms could run counter to consumer protection measures, and also tarnish the reputation of these businesses”.

The trade organisation for co-operatives said that in 27 years of registering co-operatives it has never been an administrative burden; and Helen Barber, Head of Advice and Policy, said the body actively challenges applications on average three to four times each year. She added: “There may well be more, though, which aren't brought to our attention currently, which is why we'd like BIS to take this opportunity to strengthen protection in a way that allows Co-operatives UK to challenge all rogue companies trading on the good name of co-operatives."

In its consultation response, Co-operatives UK highlighted two registered companies that did not appear to be operating under the “values and principles” of the movement. It said “Co-operative Gardeners Ltd” was “registered by one sole Director, which is clearly therefore a one person company not a co-operative under international guidelines”.

It also highlighted “The Consumer co-op” whose “rules have no signs of co-operative principles whatsoever” and is an example of how “a non-cooperative markets itself as a co-operative in order to position itself as an ethical business and benefit from consumer trust”.